06-Sep-2017 written by : FSI-Team
Have you ever wondered what would happen to your credit score when you die? Life is all about uncertainty and no one knows when the end is. So how to prepare yourself and your family in such situations? We have an answer for the same.
So what actually happens to a report when a person dies? Does the file is closed right away from the bureaus or is it kept open for a certain period of time?
The answer is NO! The credit file is never deleted or closed immediately after a person dies, instead there will be a deceased flag on the account to indicate the individual is dead. This actually helps prevent frauds from happening through the deceased’s identity. If someone tries to use the person's identity for credit, the banks would receive a "deceased indicator" towards the credit account and the bank can simply stop the loan transaction and report it to the authority. If the bureau deletes the file, there is an easy chance of fraud and the bank might process the application.
When it comes to sudden death of an individual, there are many financial issues, which need to be taken care of. The very first thing to do is to generate the cibil report and identify active credit accounts. Try compiling list of debts the individual has like personal loans, credit cards, etc. Do remember not all lenders seek help of credit ratings for lending money; you may find some debts, which will not be listed, on cibil. The cibil score report can be obtained by paying a nominal charge and proceed with the formalities.
The next step would be adding the label on the individual's report. Eighty percent of the time it's the lenders job to add the label as deceased. The families have to notify the lenders about the death and have to request to close the account, the lender then start their procedure and send the indicator to the credit bureaus about the deceased and try to label the report when they send their monthly updates. The family should enclose the death certificate as proof while notifying the lender.
This is ne of the main reasons the credit bureaus do not close the account immediately, there are many fraud people in the market and are always looking for such kind of opportunities. Immediately after such mishaps it is always suggested to report the lender on an immediate basis. If you delay such procedures then there are high chances of using the dead person's identity for a new line of credit. If the lender has not reported the label on time, which means there will be no warning on the report, and the identity theft will be on motion and the bank, will proceed with the process.
As it is mentioned that the report is not deleted immediately, it is suggested if you can review the cibil score regularly and if you find any irregularity on the report could be a sign of identity theft.
Once there is a deceased label on your report, your account automatically gets deleted after a year. On regular points all the accounts on your credit report will be deleted and you wont be able to find your report again as it will be permanently deleted from the cibil database. Those who request for a credit report in the future on this individual's name will be indicated as the person has died and the report is been deleted.
There are rare occasions where the lender inadvertently apply the deceased label on your account, this most probably happens when the person dead is a joint account holder. In such cases you can identify yourself and make them remove your label as deceased on the report.
A sudden death is an in evadible thing but having such financial knowledge will definitely help your loved ones in their bad times to lighten at least one burden of their shoulders.